The Quick Read: The monthly savings can be positive, zero, or negative, because they depend on the FHA premium you stop paying, the new loan’s interest rate and term, and how much extra balance the cash adds. Dropping the FHA annual premium frees money every month. Taking cash out and restarting the loan term can give most or all of it back. The only honest way to size it is to compare your full old payment to the full new one.
What does FHA charge each month that conventional may not?
FHA charges two premiums. The upfront premium is 1.75% of the base loan, and it is usually financed into the balance. The annual premium is collected monthly. It runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.40% as of October 15, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
That monthly premium is the money you are trying to free. HUD Mortgagee Letter 2023-05 sets out the structure. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Here is the practical read. A borrower who started with a small down payment may never see the premium end by waiting. For many of those borrowers, refinancing out is the only exit. That is an inference from HUD’s table, not a rule HUD states in those words.
A conventional loan has no FHA-style annual premium. At 80% LTV or below, private mortgage insurance is generally unnecessary. Whether any applies to your loan is a lender-by-lender question.
Is the equity ceiling a reason to switch?
No. On a one-unit primary home, both programs cap a cash-out at 80%. HUD’s Mortgagee Letter 2019-11 cut the FHA cash-out cap from 85% to 80%, after an earlier cut from 95% to 85%. Fannie Mae’s Eligibility Matrix sets the same 80% for a conventional cash-out on a one-unit principal residence. Every figure here varies by lender and program. Guidelines, property type, leverage, and credit profile all apply.
So a conventional loan does not let you take out more on a typical home. The ceiling is not what separates the two. Premiums, rate and balance are.
Multi-unit owner-occupants are the exception. The same matrix lists 75% for a two- to four-unit principal residence. If your home has more than one unit, your conventional ceiling is lower. If you would rather stay in FHA and still take cash, the FHA cash-out refinance program reaches 80% LTV on a home you have owned and occupied for 12 months before the case number. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
How is the new payment worked out, step by step?
Think of it as a bridge from your old payment to your new one. Each step either adds to the payment or takes away from it.
1. Start with your full current payment. Include principal and interest, the FHA annual premium, taxes and insurance.
2. Remove the FHA annual premium. This is the savings.
3. Add the effect of the new rate and term. A different interest rate changes the principal-and-interest line in either direction. A fresh 30-year term lowers it but stretches the payoff.
4. Add the cash you take out. Every dollar pulled out is borrowed at the new terms, so the balance goes up and so does the payment.
5. Add any mortgage insurance the new loan needs. At 80% LTV or below, this is generally nothing.
6. Compare the totals. The gap between the old and new full payments is the answer.
Your answer can land in any of three places.
| Scenario | Premium removed | Balance change | Likely net monthly effect |
|---|---|---|---|
| No cash taken, rate is similar or better | Yes | Small (costs only) | Usually lower payment |
| Modest cash taken | Yes | Up | Savings shrink, may be near zero |
| Large cash taken to the 80% cap | Yes | Up sharply | Payment may rise |
The table is directional. Your credit, rate and loan size set the real numbers.
When does the payment go up instead of down?
It rises when the cash you take, a higher conventional interest rate, or both outweigh the premium you drop.
Credit matters here. FHA premiums do not change with your credit score. Conventional pricing does. A borrower with a lower score may find conventional pricing erases the premium savings. In that case staying FHA can be the better call.
Equity matters too. If you have only a thin cushion over 80%, the loan may not reach the cap, and the cash available may be small after the payoff and costs. A low appraisal shrinks both the maximum loan and your cash, so it can move the result sharply.
Balance size can also tip it. FHA’s premium table has separate tiers above a base loan amount threshold. The point where conventional pulls ahead differs for large loans.
Does the term reset change the picture?
Yes, and it is easy to miss. Starting a new 30-year clock lowers the monthly payment, because the balance is spread over more months. But it extends the payoff and can raise total interest paid.
Say you are seven years into an FHA loan. A new 30-year loan pushes your finish line out by seven years. Part of the monthly “savings” is simply borrowing for longer. If your goal is a lower payment, that is a fair trade. If your goal is paying off the home sooner, it works against you.
The CFPB’s home loan toolkit cautions borrowers not to count on refinancing out of a loan later. Treat the new term as the one you may keep.
What about the upfront premium and closing costs?
Leaving FHA for conventional does not earn you a refund of the upfront premium. HUD’s FHA fact sheet says the refund can be credited only when an FHA loan is refinanced into a new FHA loan. For loans endorsed on or after December 8, 2004, there is no refund after the third year of insurance. Borrowers still inside year three give up the most.
A refinance also has its own closing costs. They can be paid in cash or financed into the balance, and financing them raises the loan and the payment. To find your break-even, divide your total closing costs by your net monthly savings. The result is how many months it takes to recover them. If the savings are small and you may move soon, the cost may never come back. Your Loan Estimate shows the actual costs.
What does a conventional cash-out require?
The requirements differ from FHA’s, though the leverage is similar on a one-unit home.
| Factor | FHA cash-out | Conventional cash-out |
|---|---|---|
| Max LTV, one-unit primary home | 80% | 80% |
| Ownership | Owned and occupied 12 months before case number | At least one borrower on title six months |
| First mortgage age | No separate test noted here | At least 12 months, note date to note date |
| Credit | Not priced by score for premiums | Pricing varies with score |
| Reserves | Per automated finding | Six months if DTI is above 45% |
The six-month title rule and the reserves rule come from the Fannie Mae Selling Guide. The 12-month first-mortgage test was introduced in Fannie Mae announcement SEL-2023-01. Across the wholesale programs Lendmire places FHA files with, the FHA side starts at a 580 decision score, and the automated finding governs most files. Everything is subject to lender guidelines and full file review.
Recent loan modifications or forbearance can also block a conventional cash-out. Payment history and seasoning get checked case by case.
Where does the general rule break?
A few situations change the math.
- Old FHA loans. The annual premium exemption covers only streamline and simple refinances of FHA loans endorsed on or before May 31, 2009. It is narrow. Check your endorsement date.
- Giving up the streamline. An FHA Streamline refinances an existing FHA loan with no appraisal and a limited credit review, though the premium continues. Going conventional means leaving that path behind.
- Inherited homes. FHA has an occupancy exception for inheritance, and conventional ownership rules carry their own exceptions. Ask early.
- Manufactured homes. Eligibility is narrower and typically requires real-property status. Confirm with a loan officer before assuming it works.
- Rules that change. HUD updates its handbook periodically. Treat any FHA rule here as current guidance, and check hud.gov before you rely on it.
How does the decision look in practice?
Work through four questions in order.
1. How much equity do you have after the appraisal? If you cannot reach 80% with cash left over, a cash-out may not help.
2. Where does your credit sit? Stronger credit favors conventional. Weaker credit favors staying FHA.
3. How long will you keep the home? Short horizons rarely recover the closing costs.
4. What will the cash do? Paying off higher-cost debt can free more monthly cash than the mortgage line shows. Cash spent on something with no payoff does not.
Three outcomes follow. Stay on your FHA loan if the savings are thin and your credit is modest. Go conventional if the premium savings clearly beat the added balance and the new term. If you only want a lower payment and no cash, a cash-out is the wrong tool. An FHA Streamline, which needs no appraisal and takes no cash, is the route to compare against a conventional rate-and-term refinance.
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
Pre-closing checklist
- Get your current payoff statement.
- Add up your full current payment, premium included.
- Ask for the Loan Estimate and compare the whole payment, not just principal and interest.
- Expect your escrow account to be refunded and reset.
- Know that a refinance on your primary home generally carries a three-business-day right to cancel, per the CFPB. Funds are not disbursed until that period ends.
Key Terms Defined
Annual MIP: The monthly mortgage insurance premium FHA charges, based on term, loan size and LTV.
UFMIP: The one-time upfront FHA premium, 1.75% of the base loan, usually financed.
PMI: Private mortgage insurance on a conventional loan, generally unnecessary at 80% LTV or below.
LTV: Loan-to-value, the loan balance divided by the home’s appraised value.
Seasoning: The minimum time you must have held the home or the first loan before a cash-out.
Break-even: Total closing costs divided by net monthly savings, giving the months needed to recover them.
Frequently Asked Questions
Can I move from FHA to a conventional loan at any time?
Generally yes, if you meet the conventional requirements. For a cash-out, you need time on title and a seasoned first mortgage, plus the credit, income and equity to qualify. There is no FHA rule that traps you in the loan.
Do I get my FHA upfront premium back if I go conventional?
No. The refund credit applies only when an FHA loan is refinanced into a new FHA loan. HUD’s fact sheet also ends the refund after the third year of insurance for loans endorsed on or after December 8, 2004.
Can I cancel FHA mortgage insurance at 20% equity?
Not on most newer loans. When the original LTV is above 90%, the annual premium lasts for the loan term. The 78% and 80% cancellation rights belong to private mortgage insurance on conventional loans, not FHA.
Will a conventional cash-out let me take more cash than FHA?
Not on a one-unit primary home. Both cap the loan at 80% of value. A two- to four-unit home faces a lower conventional cap of 75%.
Is there mortgage insurance on a conventional cash-out?
Generally not at 80% LTV or below, but it is not guaranteed on every loan. Whether any applies is decided by the lender and the file.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Mortgagee Letter 2023-05
2. HUD Mortgagee Letter 2019-11
3. Fannie Mae Eligibility Matrix
5. HUD FHA Homeowners Fact Sheet
6. Fannie Mae Selling Guide B2-1.3-03
7. CFPB: when the right to rescind starts
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does an FHA Cash-Out Ever Beat VA for a Veteran in a Conventional Loan? · How Much FHA Cash-Out Costs vs Conventional on a Texas Homestead · How Much an FHA Cash-Out Releases for Condo Repairs
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.